Senate), all but $22.4 million has been applied to the 1961 program. This unutilized balance has been applied to the 1962 program.

All of the additional net amount of $97 million provided for additional fighter aircraft has been applied to the 1962 program.

Of the additional net amount of $184 million provided for the B-70, all but $29.3 million has been applied to the 1961 program. The balance has been applied to the 1962 program.

In the military construction appropriations, the Congress provided an additional $20.4 million for the Army Reserve, the National Guard, and Air National Guard; $11.2 million has been applied to the 1961 program and the balance of $9.2 million has been applied to the 1962 program.

FISCAL YEAR 1962 FINANCIAL PLAN

There should be placed in the record at this point the financial plan for fiscal year 1962 for the military functions of the Department of Defense.

This plan brings together in one table a presentation of all the financial resources anticipated to be available to the Department of Defense for obligation and commitment in 1962, and the planned application of these resources. It is one of the principal tools for managing the financial resources of the Department and serves as an overall control on the obligation, commitment, and apportionment of funds. The plan is both a planning and working document and is kept up to date by periodic revision.

The first block of figures appearing in this plan-columns 2 and 3-analyze the unobligated balance brought forward into fiscal year 1962; the second block of figures-columns 4 through 12-shows the resources available for obligation in fiscal year 1962; the third block-columns 13 through 17-shows the planned apportionment program for that year; and, the last block-columns 18 through 20-shows the unobligated balances expected to be carried over into fiscal year 1963.

Column 4 indicates that a total of about $5.9 billion in unobligated balances will probably be carried into fiscal year 1962. Of this amount, about $5.4 billion-column 2 is available for completion of projects which will already have been started by June 30, 1961, and $550 million in unprogramed funds-column 3has been applied to finance 1962 programs in lieu of new appropriations.

Column 5 shows the new obligational authority in the bill currently being considered by the committee, and in the case of military construction, the amounts to be considered later.

Column 6, "Proposed Supplemental," consists of one item-$31 million for retired pay.

Column 7 shows the amount-$150 million-recommended in the President's budget to be provided by transfer from the revolving funds of the Department of Defense in lieu of new appropriations.

Column 8-anticipated reimbursements from military assistance program orders is necessarily incomplete since there is no firm basis at this time for determining either the value or distribution of the bulk of such orders that may be recieved by these appropriation accounts next year. If the Congress approves the 1962 military assistance program recommended by the President, the anticipated reimbursements from this source may total $700 to $800 million.

Column 9 reflects the amounts-$129 million-subject to automatic apportionment under arrangements worked out with the Bureau of the Budget. These are reimbursable orders involving, primarily, work or services rather than equipment or supplies. This arrangement encourages cross-servicing, by eliminating the need for specific Bureau of the Budget reapportionment action to cover the "out of pocket" costs of increased workloads caused by these orders.

Column 10 represents anticipated reimbursements from all other sourcesamounting to a total of $1,619 million. Approximately $1 billion of this amount represents reimbursements arising from intradepartmental transactions, which serve to increase the apparent, but not the actual, total resources shown on the books as available for obligation. This is because certain transactions are concurrently treated as direct obligations by the ordering service or appropriation, and as reimbursable obligations by the service which performs the work or procures the articles.

Column 11 is simply the total of columns 8, 9, and 10.

Taking all of these resources into account (recognizing that about $1 billion represents reimbursements arising from intradepartmental transactions), the total obligational availability for fiscal year 1962 would amount to about $49.6 billion as shown in column 12. Based on this gross availability, the planned apportionment program would include: $43.4 billion for direct obligation for service account

(col. 13) and $1,911 million for obligations against customer orders (col. 14)~ or total planned obligations of $45.3 billion (col. 15). The total amount planned for commitment in 1962 amounts to $3.3 billion (col. 16). Planned apportionments, for 1962, the sum of obligations and commitments, therefore, total about $48.6 billion (col. 17).

On the basis of the program, the total unobligated balance at the end of fiscal year 1962 would be $4.3 billion, as shown in column 20; $3.3 billion of this amount is expected to be firmly committed by June 30, 1962 (col. 18). The balance of $1 billion will be held in reserve for the completion of programs started before June 30, 1962, but for which obligations need not be made until later (col. 19). To this $4.3 billion in column 20 must be added, perhaps, $300 to $400 million | relating to 1962 military assistance program orders against which funds will not have been obligated by the end of the fiscal year. Thus the unobligated balances may amount to $4.6 to $4.7 billion when the books are closed on fiscal year 1962. Attachment D to this statement provides a running account of unobligated balances, new obligational availability, and obligations incurred for each fiscal year, 1951 through 1962. It is apparent from this table that the downward trend in unobligated balances will continue through fiscal year 1962. This will be true even if the estimated $300 to $400 million in fiscal year 1962 MAP orders, against which funds will not have been obligated by the end of the fiscal year, are added to the closing fiscal year 1962 balance. The unobligated balances carried over into fiscal year 1963 would then be about $4.6 to $4.7 billion compared with unobligated balances of $5.9 billion expected to be carried over into fiscal year 1962.

Attachment E provides a similar running account of unexpended balances, new expenditure availability, and exenditures for each fiscal year, 1951 through 1962. Here again, the modest downward trend is expected to continue. The closing balance of June 30, 1962, is estimated at $29.4 billion, about $1.1 billion less than the estimated balance for June 30, 1961. and about $1.3 billion less than at June 30, 1960. Of course, the greater portion of these balances is already obligated or committed.

CHANGES IN BUDGET CONTENT IN FISCAL YEAR 1962

There is one change in budget content this year that may be worth noting In the past, deutsche mark support contributed by the Berlin Magistrat for the maintenance of U.S. military forces in Berlin did not require specific appropriation by the Congress. Rather, under the authority of section 519 in the current Appropriation Act (and similar provisions in previous acts) such deutsche mark support could be accepted by the Department of Defense without specific appropriation, provided that the appropriate committees of the Congress are promptly notified. For fiscal year 1962, however, the Bureau of the Budget decided that the Department of Defense should submit its budget on a gross basis and reimburse the Treasury for the deutche mark support received from the Berlin Magis trat. In addition, the same procedure is to be followed with regard to the Spanish pesetas received and used by the Department of Defense in that country under the provisions of the economic aid agreement with Spain. The budget estimates for 1962 now before this committee, therefore, include about $21 million for these purposes.

SUMMARY OF PROGRAM CONTENT OF THE FISCAL YEAR 1962 BUDGET There are attached to this statement a number of additional tables which provide further detail on the fiscal year 1962 budget.

Attachment F, in three parts, provides a summary of new obligational authority, direct obligations, and expenditures by both functional area and organizational component for fiscal years 1962, 1961, and 1960. Attachment G provides a summary comparison of new obligational authority, direct obligations, and expenditures for fiscal years 1960-62, by functional areas. The 1961 figures in these tables include proposed 1961 supplemental appropriations in the amount of $289 million which will be outlined later in the discussion of the budget titles. Because of the carryover of unobligated funds from prior years, direct obliga tions are perhaps the best overall measure of the programs actually planned to be implemented in a given fiscal year. For this reason, it may be most useful to the committee if the discussion of the composition of the 1962 budget were in terms of direct obligations, as shown in the center block of attachment G.

MILITARY PERSONNEL

For "Military Personnel costs-Active Forces, Reserve Forces and Retired Pay"-the 1962 budget provides $12,416 million.

Obligations for Active Forces personnel will amount to $10,879 million--an increase of $118 million over 1961 and $297 million over 1960. These obligations will support a beginning and end strength of 2,492,900 and an average strength of 2,494,748 in 1962. This compares with a beginning strength of 2,475,000 and an average strength of 2,489,171 now estimated for the current fiscal year.

It should be noted that the presently planned June 30, 1961, military personnel strengths have been adjusted somewhat from those originally estimated in the President's 1961 budget request. At that time it was planned that the June 30, 1961 strength would be 2,489,000 or about 4,000 fewer than currently planned. This net difference results from a reduction of 2,100 men in the Air Force and the addition of 6,000 men to the Navy, as discussed in Secretary Gates' statement.

During recent years a steady rise in the cost per military man has tended to offset reductions achieved from lower manpower levels. This trend is expected to continue in 1962 as the average cost per man rises to about $4,361 compared with $4,319 in 1961 and $4,254 in 1960. The increase of about $42 per man from 1961 results from a number of factors.

Among these factors are the unusually high number of personnel whose period of enlistment will expire during 1962 with a resulting increase in separation costs and reenlistment bonuses; higher longevity payments as the forces continue to mature; and a slightly higher grade structure for both officer and enlisted personnel. The increase in the average number of enlisted men receiving proficiency pay is another factor. Started in fiscal year 1959, this program was initially planned for implementation in four annual steps with 1962 being the last. However, before proceeding further with this program, it was decided that a reevaluation should be undertaken. Therefore the budget provides that the number of personnel receiving proficiency pay during 1962 be held to the level planned for June 30, 1961. Nevertheless, the higher number of man-years will result in a cost increase for the program over the present year. During 1962 there will be an average of about 204,000 enlisted men in the first pay step (P-1) receiving $30 per month, and about 18,000 men in the second pay step (P-2) receiving $60 per month. It is not planned at this time to utilize the authority contained in the law to raise the rates of pay to the maximums of $50 and $100 per month, or to institute the third step of proficiency pay. Nor is it planned to use the provision for "Special pay" to officers occupying positions of unusual responsibility. It should be pointed out that the increasing cost per military man is, in great part, the result of measures which were designed to raise the personnel quality and effectiveness of the military forces and which were supported by both the Congress and the executive branch. The results have been most gratifying with significant gains recorded in improving the levels of reenlistment and recruitment, in reducing shortages of critical personnel, and in building a career force. Nevertheless, we pay for these gains in higher personnel costs.

The proposed 1961 supplemental appropriation request includes $7 million for "Military personnel, Army" and $15 million for "Military personnel, Navy." In both cases the requests are associated with the higher strengths required by the readiness measures which were instituted last summer. Although the Army's fiscal year 1961 planned end strength is still 870,000, the average strength will be 2,500 man-years higher than that originally planned. The $15 million requested for the Navy is to pay for the 6,000-man increase in the 1961 end strength, from 619,000 to 625,000.

Military personnel costs for the Reserve components in 1962 are estimated at $611 million $49 million less than the current fiscal year and $48 million less than 1959. The cost of the Reserve components-including "Operation and maintenance" and "Construction"-will amount to about $1.2 billion in 1962. This budget will support an end strength of about 936,000 reservists in paid drill training in 1962, compared with 1,003,000 in 1961 and 997,000 in 1960. The decrease of 67,000 during 1962 is composed of reductions of 40,000 in the Army National Guard and 30,000 in the Army Reserve and increases of 1,000 each in the Air Force Reserve, the Marine Corps Reserve and the Navy Reserve. The paid drill training strength of the other Reserve component is planned to remain level during the year. Again, it should be pointed out that the strengths of the Army Reserve and National Guard during the current fiscal year are being maintained at the levels desired by the Congress.

Obligations for "Retired pay" in 1962 are estimated at $926 million-of which $895 million is in the bill now before this committee and $31 million is proposed

for later transmission under proposed legislation. This legislation would authorize certain military personnel who retired prior to June 1, 1958, and who received pay under provisions of the Career Compensation Act of 1949, as amended, to receive benefits consistent with the higher rates of pay provided by the Military Pay Act of 1958. The $926 million estimated for 1962, including the $31 million under proposed legislation, represents an increase of $151 million over 1961 and $233 million over 1960.

It is estimated that the average number of persons receiving retired pay during 1962 will be 320,000 compared with 274,000 in 1961 and 244,000 in 1960. Substantial additions to the retired rolls can be expected to continue, probably at a rising rate, as increasing numbers of World War II personnel become eligible to retire after 20 years service.

OPERATION AND MAINTENANCE

Direct obligations of $10,842 million for "Operation and maintenance" are planned in 1962-$599 million more than 1960 and $114 million more than 1961. Although civilian man-years, the number of active aircraft, the number of installations, and steaming and flying hours decline gradually from 1960 to 1962. increasing unit costs continue to offset savings achieved through lower activity levels and more efficient management.

The chief cause of these rising costs, as in past years, is the growing complexity and higher performance of the new weapons and equipment in operation. For example, the cost of operating the F-105 jet aircraft is three times that of the F-100 which it is replacing in the Air Force inventory.

Other O. & M. costs also show an upward trend. The cost of operating major electronics and communications systems, such as SAGE, BMEWS, and Missile Master, will rise nearly 50 percent-from about $400 million in 1960 to $600 million in 1962. Indoctrination training for the on-the-shelf airborne alert capability of the Strategic Air Command will be maintained at an expanded rate in 1962 at a cost of $48 million. The cost of maintaining family housing will also be higher as additional units are completed and occupied.

Dependent medical care will be somewhat higher in 1962-$73 million compared with $66 million in 1961 and $64 million in 1960. The cost of the program in 1962 will still be substantially below the $80 million obligated for 1959,

The proposed 1961 supplemental request includes $255 million for the appropriations grouped under the "Operation and maintenance" title. Of this total, $185 million is required to meet the increased costs associated with the civilian personnel pay increase of last summer, $52 million for previously mentioned readiness measures, about $12 million for additional single managerships and $6 million for "Claims, Department of Defense."

PROCUREMENT

A total of about $14.6 billion in direct obligations is planned for the purchase of major items of equipment in 1962. Of this total, about $5.6 billion is for the procurement of 1,473 aircraft-515 for the Air Force, 644 for the Navy and Marine Corps, and 314 for the Army. Both the number of aircraft and the planned obligations are lower than for the current years' program but above the level of 1960.

Because the equipping of the planned number of Strategic Air Command's heavy and medium bomber wings will be completed with funds provided in the 1961 and prior year budgets, no further funds for B-52 or B-58 aircraft are requested this year. However, production rates of the KC-135 jet tanker will be maintained in 1962. These aircraft will further improve the inflight refueling capability of the Strategic Air Command.

Development work on the B-70 mach 3 bomber will go forward at a higher rate in 1962. The proposed budget contains about $350 million for this program, about $90 million above the 1961 level. The first flight test of this weapon system is planned for 1963.

Increased numbers of the C-130B turboprop assault/transport aircraft will be procured in 1962, adding substantially to the Nation's capability for limited war operations. The development of a new long-range, cargo-transport aircraft, the CX-1, specifically designed for MATS will be continued. Because of its expected low ton-mile cost this aircraft should be suitable for adoption by commercial carriers.

Of particular interest in connection with Air Force tactical support of the Army is the fact that the F-105 fighter-bomber for air support of the ground forces will be procured in substantial numbers in 1962. The high performance and

wide versatility of these aircraft should contribute substantially to the effectiveness of our tactical forces.

The number of aircraft in the Navy's procurement program will be somewhat lower than 1961 but above that of 1960. Included in the 1962 buying list are significant numbers of A-4D and A-2F attack bombers, F-8U-2N and F-4H-1 fighters, as well as a variety of other search and patrol aircraft, and helicopters.

The number of aircraft in the Army's 1962 procurement program will be substantially increased over 1961 to a level about double 1960. Included in the 1962 program is another increment of the Mohawk surveillance aircraft and increased quantities of the Caribou transport, the Iroquois utility helicopter and the Chinook transport helicopter.

The continuing shift to missles of all kinds in our defense program is reflected in the fact that a total of almost $4 billion is planned for obligation in fiscal year 1962. This is a larger sum than any previous year. Approximately $3.3 billion of procurement funds will be programed for the four main strategic missilesATLAS, TITAN, MINUTEMAN, and POLARIS as compared with $3 billion in 1961 and $2.1 billion in 1960. Including research, development, test, and evaluation and military construction-and in the case of POLARIS, the cost of the submarines-the amount programed for these four systems will rise from about $3 billion in 1960 to about $3.9 billion in 1962, an increase of about 30 percent.

Last year I pointed out that the ATLAS had reached a point in its developmentproduction cycle where it should be, and was being, placed on a fully funded basis, in the same manner as any other procurement program. Up to that time all the Air Force ballistic missiles had been funded on an incremental basis. Now the TITAN has reached that point and it, too, is funded in the 1962 budget in the same manner as any other procurement program.

Funding for the 13 ATLAS squadrons, the earliest ICBM system, was largely completed by the 1961 budget. The 1962 budget includes about $200 million to round out the program. The funds included in the 1962 budget for TITAN will largely buy the missiles required for the 14 squadron program. MINUTEMAN will take a substantially increased amount of funds in 1962 as it enters large-scale production. Funds are included for POLARIS missiles at a somewhat higher level than 1961. The 1962 budget also includes funds to complete the approved HOUND DOG air-to-surface missile program.

In the continental air defense area, no new funds will be required for the BOMARC program and the 1962 budget will generally complete the funding for the modernization of the NIKE-HERCULES ground radars.

A wide variety of other missiles will also be purchased in 1962: over 1,000 TALOS, TERRIER, and TARTAR for fleet air defense; several thousand SPARROW III, SIDEWINDER, and FALCON for use by Navy and Air Force interceptors; and the BULLPUP air-to-surface missile for close support of ground forces by the Navy, the Marine Corps, and the Air Force.

Of particular importance to the improvement of our ground forces' capabilities will be the planned purchase of the mobile HAWK and man-carried RED EYE for the defense of the ground forces in the field against aircraft attack, the PERSHING, SERGEANT, HONEST JOHN, and LITTLE JOHN, surface-to-surface tactical missiles, and antitank missiles to provide a wide range of firepower in support of the ground forces.

Obligations for ships in 1962 will total about $2.1 billion-substantially above the level of 1961, and about $600 million more than in 1960.

The 1962 shipbuilding program provides for 30 new ship starts and 22 conversions or modernizations. New construction will include seven guided missile frigates, five POLARIS submarines (plus advance procurement of long leadtime components for five more), three other nuclear-powered attack submarines, six escort vessels including three guided missile types, and nine miscellaneous vessels. Six conventional submarines, and two other ships will undergo major conversion and another increment of 14 destroyers will be modernized as part of the fleet rehabilitation and modernization program.

The "Other" procurement category shows a total of nearly $3 billion of obligations planned in fiscal year 1962 compared with about $2.7 billion in 1961 and $2.4 billion in 1960. This steady upward trend reflects the increasing emphasis on Army modernization, discussed in Secretary Gates' statement. Obligations for ordnance and vehicles, primarily weapons and equipment for the modernization of the Army and Marine Corps, are planned at nearly $1.2 billion in 1962-up $130 million over 1961, and $400 million over 1960.

Some examples of the ordnance and vehicle items to be procured in 1962 are several hundred M-60 tanks with diesel engines and 105-millimeter guns; 1,800 armored personnel carriers; over 250 M-88 tank recovery vehicles; about 24,000